Amid the row over Kerala's borrowing limit, the Centre has finalised it at ₹17,936 crore for the nine-month period up to December this year.
Compared to the same period last year, the limit is lower by ₹5,656 crore.
Reacting to the development, Finance Minister K.N. Balagopal described it as an ''arbitrary decision'' taken by the Union government that will affect development and welfare measures in the State.
In May, the Centre, at the time yet to finalise the limit, had permitted Kerala to borrow ₹5,000 crore from the market to meet immediate requirements.
At 3.5% of the Gross State Domestic Product (GSDP), Kerala's borrowing limit in the 2022-23 fiscal had been fixed at ₹32,439 crore, plus a 0.5% additional borrowing limit that is subject to power sector reforms.
However, the Centre has been insisting that ''off-budget'' borrowings made through the Kerala Infrastructure Investment Fund Board (KIIFB) and the Kerala Social Security Pension Ltd (KSSPL) are direct liabilities of the State, and should be adjusted against the State's net borrowing ceiling. Kerala had strongly opposed this argument.
The Comptroller and Auditor General (CAG) had refused to accept Kerala's argument that KIIFB borrowings are not direct liabilities of the State. The latest State Finances audit report of the CAG also notes that the borrowings cannot be treated as contingent liability since KIIFB has no revenue of its own and the State has to provide for KIIFB's debt obligations by transferring its own revenue resources through the annual budget.
But Kerala maintains that KIIFB borrowings are on the basis of government guarantees and therefore are not direct liabilities of the State, but only contingent liabilities especially since KIIFB funds remunerative projects and generates its own income.
